Mediacom CEO Mark Pejic: Says he has been ‘open and transparent’ with the clients affected

Australia’s second biggest media agency Mediacom is facing a major challenge to its reputation after it emerged that it had overcharged at least two clients by submitting inflated claims on the TV audiences its campaigns had delivered.

One member of staff has been fired, another suspended and Mumbrella understands a further 10 have resigned over the affair which involves its clients Foxtel and Yum Brands.

External auditors have been called in to the agency after the ‘reporting discrepancies’ were found in the reports on TV audiences submitted to the advertisers.

Foxtel – which said it uncovered the problem as part of its audit process – spends a reported $50m a year via the agency. Yum Brands spends a reported $44.5m a year on its KFC and Pizza Hut brands.

There is no suggestion that Mediacom CEO Mark Pejic was aware of the inflated claims before they came to light. Mumbrella also does not suggest that the inaccurate figures were intended to deliberately financially disadvantage the clients. Pejic told Mumbrella:

“We’ve identified reporting discrepancies relating to one distinct area, which is television ratings, in a small number of our Sydney based clients.

“This has resulted in one employee being dismissed and another suspended, pending a full investigation and a small number of resignations over the last week.”

Mediacom is the largest media agency in WPP’s GroupM, which is in turn Australia’s biggest media buying group.

Foxtel’s chief marketing officer Ed Smith told Mumbrella: “Foxtel, as a result of its audit processes has uncovered some issues at Mediacom that we are working through with Mediacom and GroupM.”

Smith declined to comment on Foxtel’s future relationship with the agency.

Nikki Lawson, CMO of Yum Brands, told Mumbrella she had been unaware of irregularities until Mediacom got in touch to reveal the problem.

Lawson also said she expects to hear more in the next two weeks. Asked if Yum would review its relationship with MediaCom, she said: “Things happen. Obviously we don’t know the extent of what’s happened yet, so we will wait and see what what it’s all about.”

Among those understood to have resigned are Jane Henderson, head of implementation planning and investment along with a further 11 members of staff also understood to be gone.

Ashley Earnshaw, head of content and partnerships has told Mumbrella that his departure was unrelated to recent events.

Pejic did not give specifics on everyone who had left, but told Mumbrella the media agency had been open and honest with staff about the issue.

“The key thing is we identified the issue with regards to television ratings. How did we do that? Because we do spot checks in our business,” he said, while also confirming external auditors would be called in to review the accounts.

“I have been open and transparent, firstly with all of our people, and definitely the clients that have been affected. It is a small group of clients and we are working with them to rectify the issue and keeping them constantly updated,” he said.

“In addition an external audit firm will also work on behalf of our clients to ensure we are running to global best practice, which I am sure we are. We have already put new procedures in place to ensure this isolated incident doesn’t happen again.”

Pejic said he would be open and honest throughout the coming weeks and that he was confident it was isolated. “We are committed to being the most open and honest company in the industry,” he said.

“We took responsibility and moved very very fast. We did not sit on this and I am definitely using this as an opportunity to ensure that this area gets better very very quickly.”

Nic Christensen and Alex Hayes

Any comments on this post may be subject to delay while undergoing careful legal consideration

Updated: Amendments have been made to this article since Mediacom revealed the results of its audit.

The headline previously read “Thirteen staff depart Mediacom after overcharging clients KFC and Foxtel”. This has been altered to reflect GroupM’s contention that clients had not been overcharged for inventory.

The second paragraph previously stated: “One member of staff has been fired, another suspended and Mumbrella understands a further 11 have resigned over the affair which involves its clients Foxtel and Yum Brands.”

This has been altered to reflect the fact GroupM says 12 people have left the agency as a direct result of the incidents.

Nic Christensen is the media and technology editor of Mumbrella.
Within the Mumbrella team Nic's responsibilities include writing about media (mainly television, radio and outdoor), media agencies, ad technology and media policy. He is former media writer for The Australian and has also worked as a reporter for The Daily Telegraph and senior producer for Radio 2GB.

I have worked in media agencies and programmatic buying agencies for the past 7 years. I am happy to offer 10 interested clients spending more than 1m per year (in digital) a frank, free of charge and informal audit of their media and digital buying business. I do not have access to big agency tools but it is very insightful to see how things look using the data that you, as clients, have a right to possess. Please don’t hesitate to get in contact with me to discuss further.
Matt McDonald
0438954494

Where in this article did it mention anything about this being about digital or programmatic ? Given the people mentioned in this article I would suggest it has nothing to do with these channels or method of buying.

An auditor friend opined this could be the catalyst for further audits of the media industry. Partners in auditing firms send notes to all their clients if audits uncover multiple issues within an industry. Particularly if the financial or procedural issues are significant. It’s a nice fee earner while potentially uncovering a few hundred thousand for the client. Who would say no?

You think Procurement departments are painful, wait until Risk and Compliance types get involved…

Any audience metrics based on Oztam are a joke anyway.
If TV audiences were transparent there would be a massvie shakeup in the industry and rates would fall in line with what is acutally being viewed.

The media auditing services and independent consultants we know and love are loving this right now!

Whilst details of Mediacom’s specific issues here are unclear, I can say that anecdotally media has a bit of ‘smoke and mirrors’ about it that is surely no longer going to fly. Production has been through it, and now media (dare I say especially digital).

I’ve had a client discuss bringing their own media people in-house recently, and I don’t blame them when this kind of thing happens. I don’t blame clients for wanting people on their side in this industry, regardless of the outcome of this particular issue.

This train was set in motion back in the ’90s when accreditation was (correctly) abandoned and the standard 10% commission and 7.5% service fee was done away with.

Then advertising agencies decided that the media department was too much of a cost centre – lots of labour and expensive research to buy. Also no opportunity for outrageous production costs and a nice little mark-up on them.

So, the media department was set adrift and media agencies started to spring up. The problem was that the media agency got 3% of the 17.5% and the creative agency got 14.5% (at the time – but now probably closer to 10-12%).

The business model was make an ad once, send it to the media agency to get it run and get paid four times more than the people that have to plan, book, buy and post-analyse every TV spot. Now that there is around 25 million TV spots a year the remuneration model has to change. The problem is in the holding companies propping up the creative agencies with skewed revenue-to-work ratios. Fix that and watch a lot of the media agency struggles evaporate. Just shifting from 3% to 3.5% is a 17% improvement in revenue.